Global Markets Reel as AI-Fueled Rally Unravels, Triggering Broad Selloff Across Sectors

Global equity markets tumbled for a second day Friday as a historic selloff in US technology stocks cascaded across Asia and Europe, driven by mounting fears that the artificial intelligence boom that powered years of gains is facing a regulatory and financial reckoning.

The trigger was Thursday's rout on Wall Street, where the Nasdaq Composite suffered its steepest single-day decline in 19 months, falling 5.5%. The Philadelphia Semiconductor Index plunged 12.2%. The Magnificent Seven — Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta Platforms and Tesla — lost more than $1 trillion in combined market value, with Nvidia alone accounting for more than $440 billion of that decline, according to a market report cited by NDTV Profit.

The selloff reflected growing investor anxiety that the Democrats' victory in the US midterm elections will bring tighter scrutiny of the AI sector and slow the expansion of data centers that have driven demand for chips and computing infrastructure.

**Asia Bears the Brunt**

The panic spread to Asia at the opening bell Friday, with several markets suffering their worst single-day drops in decades. South Korea's Kospi plunged as much as 8.8%, triggering a 20-minute trading halt, before closing down 6%. Taiwan's Taiex fell as much as 9% and entered a bear market, closing 4.5% lower but posting its biggest weekly loss since 2001. Japan's Nikkei 225 slumped 6% in its deepest one-day drop since April 2025, according to Al Jazeera.

Semiconductor stocks led the declines. SK Hynix fell as much as 13% and Samsung Electronics dropped more than 10% in South Korea, NDTV Profit reported. Taiwan Semiconductor Manufacturing Co. fell as much as 8.5% before closing 4.7% lower. In Japan, Kioxia plunged 11% and SoftBank Group slid 11%.

Four major Asian markets are now in bear-market territory, defined as a decline of at least 20% from a recent peak. South Korea's Kospi is down about 45% from its June record, China's Shenzhen market 30% below its June high, Taiwan's market 24% below its October peak and Japan's Nikkei 21% below its June record, according to NDTV Profit.

China and Hong Kong stocks also fell sharply. The Shanghai Composite Index dropped 1.1%, while the tech-focused Star 50 Index and the AI Index slumped as much as 5% before recouping some losses, Free Malaysia Today reported. Hong Kong's Hang Seng Index was down 1%, while the Hang Seng Artificial Intelligence Index tumbled 4%.

**Authorities Scramble to Contain Damage**

Governments across Asia moved quickly to arrest the slide. Taiwan's Financial Supervisory Commission announced it will impose curbs on short selling from Nov. 9, cutting the cap on intraday short-sale orders to 3% of a stock's average daily volume from 30%, and raising the minimum margin requirement for short sales to 130% from 90%, according to Zero Hedge. The Finance Ministry said it is prepared to deploy its NT$500 billion ($15 billion) stock stabilization fund, citing "a significant deterioration in market confidence."

In South Korea, Deputy Prime Minister and Finance Minister Lee Hyoung-il promised "proactive" measures and suspended the margin-loan collateral rule that forces brokers to dump leveraged retail positions, Zero Hedge reported. Trading on the Kospi was temporarily halted amid the slide.

China's state entities stepped in to buy equities in a bid to stabilize the market, Al Jazeera reported. The Taiwan economy ministry issued a statement saying demand for AI, high-performance computing and cloud services is expected to keep expanding.

**European Markets Slide**

European stock markets fell sharply as the rout spread across the Atlantic. The FTSE 100 closed down 1% after recovering from a 2.35% intraday loss. Germany's Dax fell 2%, France's Cac 40 lost 0.8%, Spain's Ibex ended down 0.6% and Italy's FTSE Mib fell 0.9%, according to The Guardian.

**The Texas Factor**

A key source of the regulatory concern is Texas, which accounts for about 25% of planned US data-center capacity, according to Goldman Sachs estimates cited by NDTV Profit. Democrat Gina Hinojosa's surprise victory over Republican Governor Greg Abbott has raised the prospect of a halt on new data-center approvals until rules are introduced to protect residents from higher electricity and water costs, NDTV Profit reported. The potential for new rules governing electricity and water consumption has become a major uncertainty for companies planning large computing facilities.

**Analysts Warn of Deeper Problems**

The selloff reflects more than just political jitters. Analysts say the AI trade was already on shaky footing due to concerns about returns on massive spending on infrastructure.

"The selloff shows that AI stock prices had been built on rosy illusions about the future, and now that illusion is gone," Dong Baozhen, chairman of asset manager Lingtong Shengtai, told Reuters, as reported by Al Jazeera and Free Malaysia Today. "The US stock market has been the standard-bearer and backbone of the global AI bull run. Now that backbone has snapped. Can AI bull markets elsewhere hold up on their own?"

Lee Robinson, CIO of Altana Downside Protector Fund, told The Guardian the selloff has been "a long-time coming" and is not just caused by the midterms. "What we are seeing today is the result of stretched valuations and last month's re-pricing in credit markets, specifically the rising Credit Default Swaps of the Magnificent Seven and CoreWeave. Credit is the engine of capital markets which equities will always eventually follow."

Toby Walsh, chief scientist for the AI Institute at Australia's University of New South Wales, told Al Jazeera he expects new regulations on data centers in many countries, including the US, Australia and the UK. "We're spending money a bit too quickly. And maybe this is the way to let that bubble deflate in a manageable way."

**US Markets Show Mixed Signals**

US tech stocks opened higher Friday, with the Nasdaq up 1.2% in early trading, lifted by gains in AI-linked names such as AMD (+8.1%), SanDisk (+8.3%) and Nvidia (+6.5%), according to The Guardian. But the Dow Jones Industrial Average fell 1%, dragged down by old-economy stocks like Nike, Walmart and McDonald's. The Nasdaq closed up 1.09% but posted its fourth weekly fall in a row, signaling the recovery may be fragile.

Fawad Razaqzada, market analyst at Stonex Trading and FOREX.com, told The Guardian that AI concerns linger. "Technology stocks staged a sharp recovery on Friday after yesterday's brutal sell-off wiped trillions of dollars off global equity valuations. Today's bounce has carried the Nasdaq 100 straight back into former support, and the worries behind the rout, from AI regulation to the sheer scale of tech spending, have not gone away."

**Broader Market Stress**

The turmoil extended beyond equities. Oil is suffering its worst four-day selloff since COVID, with systematic selling pressure mounting, according to Macrobusiness. Treasury yields have plunged, but systematic bond shorts remain sizeable.

The scale of foreign selling in Taiwan underscores the severity of the exodus. Foreign net selling on Thursday reached $3.1 billion, extending a six-session streak totaling $19.2 billion in outflows, and part of a larger trend of selling 19 of 20 sessions since Oct. 6 totaling $48 billion, according to Goldman Sachs data cited by Zero Hedge. Taiwan's NT$500 billion stabilization fund represents roughly one-third of what foreigners have pulled out since Oct. 6.

The selloff has wiped out hedge fund gains and led to layoffs, Reuters reported, as cited by The Guardian. The question now is whether government intervention and bargain hunting can stabilize markets, or whether the unwinding of the AI trade has further to run.